Artificial intelligence continues to dominate headlines — but some of the most explosive opportunities are flying under Wall Street’s radar. While large-cap names like Nvidia and Microsoft get most of the attention, there are several AI-focused penny stocks trading under $5 that are catching serious momentum.
For traders looking to take advantage of AI-driven volatility, these small-cap names are worth watching closely.
Here are three top AI penny stocks to watch now…
3 Top AI Penny Stocks to Watch in July
| Stock Ticker | Company | Performance (YTD) |
|---|---|---|
| NASDAQ: SOUN | SoundHound AI Inc. | -8.6% |
| NASDAQ: APLD | Applied Digital Corporation | +2.94% |
| NASDAQ: IREN | Iris Energy Ltd | +6.76% |
These aren’t stocks that I’m necessarily buying…
These are stocks that I’m watching.
Want my whole list of AI and quantum computing penny stocks?
10 Top AI and Quantum Computing Penny Stocks for July 2025
The following three picks I’m watching extra closely…
SoundHound AI Inc. (NASDAQ: SOUN) — Global Voice AI Adoption Builds
SoundHound AI is gaining traction as one of the leading voice interface companies in the world. Their technology supports over 25 languages and is used in vehicles, restaurants, and customer service settings.
Read more about SoundHound’s initiatives here!
The company recently announced major expansions, including a renewed deal with Tencent for auto integration, partnerships with Hyundai and Kia, and deployments across more than 13,000 restaurant locations. In Q1 alone, SoundHound’s voice engine processed over 2 billion queries.
The company’s latest enterprise platform, Amelia 7.0, is being adopted in verticals like telecom, healthcare, and financial services — positioning the company as a serious player in applied AI.
Why I’m Watching SOUN:
- Real-world deployments across multiple sectors
- Surging enterprise adoption
- Room to run if momentum holds
Soundhound was one of the first runners in the AI era. Only price pays, but the stock’s legitimate growth is keeping it in play while other AI penny stocks have fallen to the wayside.
Applied Digital Corporation (NASDAQ: APLD) — From Hype to Sell-Off
APLD spiked in early June after announcing a $7 billion deal with CoreWeave to lease capacity at its North Dakota data center. The move quickly unraveled when regulatory filings revealed that CoreWeave had sold its entire stake in APLD, although the deal remains intact.
The stock has since fallen sharply, dropping over 30% from its highs. With continued uncertainty around profitability, APLD is now on watch for potential bounce setups or further downside continuation.
Why I’m Watching APLD:
- Extreme volatility following massive hype
- Still in the news cycle — traders watching for any reversal catalysts
- One of the most talked-about AI penny stocks in June
This is a sentiment-driven setup. Until confidence is restored, every bounce should be treated with skepticism.
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Iris Energy Ltd (NASDAQ: IREN) — Dual Exposure to AI and Bitcoin Mining
Iris Energy has been one of the top-performing AI-related penny stocks in 2025. The company operates Bitcoin mining data centers but has recently shifted into the AI space by investing heavily in high-performance GPU infrastructure.
In June, IREN hit its 50 EH/s mining target, secured over 2,400 next-gen NVIDIA Blackwell GPUs, and launched Horizon 1 — a 50MW liquid-cooled AI data center project. It also completed a $550 million convertible note raise and posted record revenue of $65.5 million for the month.
While the company’s core revenue still comes from Bitcoin mining, its strategic push into AI compute gives it a speculative angle many traders are watching.
Why I’m Watching IREN:
- Strong growth in both Bitcoin and AI segments
- High-margin AI cloud services ramping fast
- Speculative dual narrative with proven execution so far
IREN remains volatile and is sensitive to both AI sentiment and Bitcoin prices — but traders are paying attention.
* Past performance doesn’t indicate future results.
Final Thoughts: How to Approach AI Penny Stocks
AI is one of the most powerful trading narratives in the market right now — but not every stock with “AI” in the headline is worth chasing. The key is to find companies with real catalysts, momentum, and a history of responding to news.
These are not buy-and-hold plays. They’re trading vehicles. Have a plan, respect your risk, and stay disciplined.
Want an edge? My team and I have developed XGPT — an AI tool that helps identify high-odds trading setups faster than any human could. In markets this fast, every second matters.
Whether you like it or not, AI is part of modern trading. Other traders are already using it, shouldn’t you?
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